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20 Years Later, Criticisms of NAFTA Often Miss the Point (Pt. I)

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At my liberal arts college, any mention of NAFTA in a class or group discussion was accompanied with a roomful of somber head shaking. In our view, NAFTA was the corporate-driven vehicle that favored rich over poor and had displaced millions of farmers from their lands, in yet another sacrifice for neoliberal policies.

However, while even the main proponents of NAFTA will admit that it is a flawed agreement, targeting it as the root of every problem that has emerged in Mexico, the U.S. and Canada in the last 20 years from immigration to drug trafficking, is misguided -- but reflects the need for more comprehensive economic and social policy collaboration between the two.

In the first installment of this article, I will discuss how criticisms of NAFTA are often misguided, and in the second, I will talk about how both countries can build off their multilateral relationship by supporting policies that promote social inclusion, immigration and drug reform.

NAFTA Is Not Catastrophic, Nor a Silver Bullet

The truth is that NAFTA was never meant to be an "instrument for social inclusion," as Bill Clinton's former Chief of Staff, Mack McClarty, pointed out. McClarty spoke last week at the "NAFTA After 20 and in 20" launch, a panel presented by the Americas Society/Council on the Americas, alongside former Mexican President Ernesto Zedillo.

While even McClarty admitted that at the time of the bill's passage, some elements of NAFTA's impact were exaggerated due to "political expedience," it is important to recognize that NAFTA is a trade agreement at heart -- not a policy intended to target environmental issues, immigration reform or social inclusion. As Shannon K. O' Neil, Senior Fellow on Latin America at the Council on Foreign Relations and author of Two Nations Indivisible: Mexico, the United States and the Road Ahead, wrote, "These are important issues, but they are ones NAFTA was never designed to address."

What NAFTA does reveal is an unprecedented level of integration between the economies of the U.S. and Mexico. Not only is it unfeasible to turn back, but its effects have also not been disastrous. Contrary to Ross Perot's warning of a "giant sucking sound" of U.S. jobs disappearing, McClarty asserted that he "didn't hear the sound." In fact, a University of Michigan study cited in Two Nations Indivisible shows that investment abroad also means investment domestically. When a firm hires 10 new employees abroad, it will actually hire, not lay off, at least two employees at home.

In Mexico, economic integration has actually allowed a growth of the middle class and increased productivity in Mexico with a 6 percent growth in NAFTA-influenced sectors and 2.5-3 percent in internal sectors. Quoted in the highly critical AFL-CIO report on NAFTA, Maria del Carmen Llamas, Secretary of Foreign Relations at the Sindicato de Telefonistas de la República Mexicana said that "the impacts of NAFTA have been the destruction of workers' purchasing power, and the loss of benefits and quality employment in Mexico."

But this isn't true. NAFTA has benefited Mexicans as consumers, providing the middle class with more opportunities for entrepreneurship through business loans and credit cards to business professionals and weekly payment plans on increasingly accessible household appliances. Plus, it has decreased poverty and increased social mobility. In the mid-1990s, seven out of 10 Mexicans were considered poor by the Mexican's government measures. Today, it is closer to two in five, according to O'Neil.


Many Criticisms of NAFTA Attributable to Other Factors Both at Home and Abroad

Of course, there is still much work to be done. NAFTA did not address Mexico's underlying financial problems, as economic "fiefdoms" and monopolies continue to overpower the Mexican business sector. But as Zedillo pointed out, "NAFTA is only one part of the Mexican economy."

Other factors, from the peso crisis to the solidification of democracy in Mexico, may have slowed some necessary reforms. After a 50-year reign by the authoritarian democracy-by-name-only PRI, the '90s brought new leadership to the executive branch. The solidification of democracy and due process of law have vitally affected the country's governance. Mexico has attempted to revamp many broken systems in the country, such as the judicial branch and police corruption, problems that have plagued Mexico for decades -- not as a result of NAFTA.

The AFL-CIO publication "NAFTA After 20" reports that NAFTA has caused unionization rates to decline in all countries, when in actuality there was only a significant drop for Mexico in the wake of the 1995 peso crisis, and since then have been on the rise. Unionization activities dropped during the Bush administration, but since 2008 have not been significantly different than pre-NAFTA rates.

AFL-CIO also reports that NAFTA increased immigration, which doubled since NAFTA was passed. However, such indices have since leveled off, perhaps due in part to demographic bubble, the 2008 recession in the U.S., or to increased opportunities in Mexico due to some of these reform processes. Thanks in part to education reforms in Mexico (including taking down the corrupt leader of Mexico's crooked Teacher's Union) the college-bound population doubled to nearly a third of Mexicans.

Finally, AFL-CIO claims that Obama has called the impact of NAFTA "devastating." But the citation for this quote in fact links to an article titled "Obama: NAFTA Not So Bad After All," in which Obama concedes this statement, instead saying he wants to improve NAFTA to include enforceable sustainable energy and labor standards in the pact.

Perhaps the impulse to blame NAFTA for every problem between the United States and Mexico stems from the fact that there are very few bilateral agreements or inter-governmental collaboration between the two countries at all other than free trade. But, as Zedillo noted, "Trade is only one of many economic programs with social consequences." This is proof that outside of NAFTA, both the U.S. and Mexico need to champion policies that benefit both sides of the border, working together to promote specific policies that tackle issues of poverty and inequality.

When NAFTA was passed in 1994, O' Neil aptly sums up that "the U.S. was not ready to stand up for democracy next door, it was willing to promote economic globalization." Twenty years later, it's about time we collaborate to stand up for both.

In the next installment, I will discuss in more detail how the U.S. and Mexico can expand their relationship to address social inclusion, immigration and drug policy reform.